page_title: Banking in Switzerland
section_title: Tax evasion
hierarchical_section_title: Banking in Switzerland / Tax evasion
caption_attribution_description: English: The People Of Geneva Monument near the Flower Clock at the Jardin Anglais
context_page_description: Banking in Switzerland dates to the early eighteenth century through Switzerland's merchant trade and has, over the centuries, grown into a complex, regulated, and international industry. Banking is seen as emblematic of Switzerland, along with the Swiss Alps, Swiss chocolate, watchmaking and mountaineering. Switzerland has a long, kindred history of banking secrecy and client confidentiality reaching back to the early 1700s. Starting as a way to protect wealthy European banking interests, Swiss banking secrecy was codified in 1934 with the passage of the landmark federal law, the Federal Act on Banks and Savings Banks. These laws, which were used to protect assets of persons being persecuted by Nazi authorities, have also been used by people and institutions seeking to illegally evade taxes, hide assets, or generally commit financial crime.
  Controversial protection of foreign accounts and assets during World War II sparked a series of proposed financial regulations seeking to temper bank secrecy to little success. Switzerland has been one of the largest offshore financial centers and tax havens in the world since the mid-20th century.
context_section_description: Many sovereign states do not legally require private bankers to confirm whether or not a client has or has not paid their taxes, in any capacity. On top of this, Switzerland's banking secrecy laws prohibit the disclosure of client information under a variety of federal, cantonal, and civil policies. Many foreign nationals open Swiss bank accounts to take advantage of these laws and tax distinctions. While citizens of Switzerland retain the full force of banking secrecy protections, foreign clients are afforded some of the most stringent bank–client confidentiality protections in the world. In exchange for banking services, the Swiss government charges "a low, lump-sum option on the money they bank", after which Swiss tax authorities consider client tax burdens "settled". After the Banking Law of 1934 was passed, Swiss bankers traveled across Europe to advertise its banking secrecy during World War II. As European countries began to increase taxes to finance the war, wealthy clients moved their holdings into Swiss accounts to avoid taxation.
  Starting in 2019, Switzerland began to share the details of 3.1 million bank accounts held by foreigners (to the country of origin or residence) as part of the automatic exchange of information agreement it has signed. Swiss banks, insurance and trusts have a legal obligation to comply but charitable Swiss foundations are so far exempt.  As of 2019, Switzerland receives financial data from 75 countries and shares data with 63 (81 countries starting in 2021).
  According to the 2018 Financial Secrecy Index, Switzerland's banking secrecy laws have rendered it a premier tax haven since the 1900s. It also noted that this status has been frequently abused by criminals to illegally evade paying taxes in their home country. One of the most prominent attractions to the disclosure protection laws is the distinction between tax evasion (non-reporting of income) and tax fraud (active deception). Akin to the distinction between legal tax avoidance and illegal tax evasion in the U.S., the non-reporting of income is only a civil offense in Switzerland while tax fraud is a financial crime. When foreign clients deposit holdings into a Swiss bank account, the bank is legally prohibited from disclosing balances or client information to tax authorities. This prohibition can only be waved if the client has produced a written statement of consent or a financial crime has been directly linked to the bank account. More often than not, clients don't consent to foreign tax authorities which leaves only the latter circumstance available. Many client services available in Switzerland (e.g. numbered bank accounts) are used to shield client data from tax authorities.
  Breaches of banking secrecy laws in Switzerland are automatically processed pursuant to Article 47 of the Banking Law of 1934: those who disclose client information are subject to a maximum of five years imprisonment and 250,000 francs (€215,000 or US$250,000) in fines. Whistleblowers and leakers of client information often face hostility from the public and sustain professional set backs. Denounced as a criminal in Switzerland, a federal arrest warrant has been in place for Bradley Birkenfeld since 2008, after he disclosed UBS client information to the U.S. Internal Revenue Service in 2007. After the 2008 financial crisis, the Swiss Parliament initiated a series of international tax treaties that rolled back banking secrecy protections for foreign clients in response to pressure from the European Union, United States, and United Kingdom. Despite implementing nearly 50 information transfer agreements and numerous limitations to banking secrecy protections for foreign clients, Switzerland has been ranked among the top three tax havens in the world every single year since the financial crisis, most recently in 2018. The majority of the overseas wealth in Switzerland originates in Germany, France and Saudi Arabia.
caption: Citizens of Switzerland retain the country's strictest, most expansive, and unalienable banking secrecy protections as it pertains to taxation.
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